Head of the International Monetary Fund, Christine Lagarde, welcomes political
progress in both Greece and Italy but says rescue of the eurozone will rely
on the "steady, solid, sustained" implementation of bail-out
programme.

12:01PM GMT 12 Nov 2011

IMF chief Christine Lagarde welcomed the "significant progress" made in resolving the political instability in Greece and Italy that has sent shock waves through world markets.

But in a Tokyo press conference, the International Monetary Fund managing director warned that if the situation in Europe worsens further, Asia will feel the effect through trade and financial impacts.

Her visit to Japan came as Greece and Italy both forged ahead in efforts to contain political crises that have rekindled concerns the eurozone's debt woes could help send the global economy into a double-dip recession.

Greece's new unity government headed by Lucas Papademos took office on Friday to save the debt-stricken nation from bankruptcy after a historic power-sharing deal struck between warring parties.

And should Italian lawmakers rubber-stamp a reform package aimed at staving off bankruptcy on Saturday, Ms Lagarde said the implementation of these measures combined with the rescue package agreed at the meeting of EU leaders at a summit in Brussels in late October, could hold the key to preventing further contagion.

"If that happens [implementation of Italian programme of reforms] and if the agreement entered between two members of the Eurozone on the 26 and 27th of October are implemented dutifully then clearly the situation will be clarified and should be improved significantly. But it's going to be a matter of steady solid, sustained implementation of measures, which are sometimes difficult."

Her trip had earlier taken in Russia and China and the former French finance minister warned that a deepening of the eurozone crisis would impact Asian economies, echoing earlier comments that the world risked a "downward spiral" if it did not pull together to tackle the problem.

She said Asia "clearly continues to propel the global recovery" but warned that Japan, like the rest of the world, will also face challenges given the difficult situation in Europe.